AUDITING THEORY

• PSA 300 PLANNING AN AUDIT OF FINANCIAL STATEMENTS

• PSA 315 IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL
MISSTATEMENT THROUGH UNDERSTANDING THE ENTITY AND ITS
ENVIRONMENT

PSA 300
PLANNING AN AUDIT OF FINANCIAL STATEMENTS

1. Planning an audit involves:

• establishing the overall audit strategy for the engagement; and

• developing an audit plan.

Preliminary Engagement Activities

2. The auditor shall perform the following activities at the beginning of the current audit
engagement:

• Perform procedures regarding the continuance of the client relationship and the
specific audit engagement.
• Evaluate compliance with ethical requirements, including independence.
• Establish an understanding of the terms of the engagement.

Planning Activities

3. The auditor shall establish an overall audit strategy for the audit. The overall audit strategy
sets the scope, timing and direction of the audit, and guides the development of the more
detailed audit plan.

4. The establishment of the overall audit strategy involves:

a) Determining the characteristics of the engagement that define its scope;
b) Ascertaining the reporting objectives of the engagement to plan the timing of the audit
and the nature of the communications required;
c) Considering the important factors that will determine the focus of the engagement
team’s efforts;
d) Considering the results of preliminary engagement activities and, where applicable,
whether knowledge gained on other engagements performed by the engagement
partner for the entity is relevant; and
e) Ascertaining the nature, timing and extent of resources necessary to perform the
engagement.

5. The auditor shall develop an audit plan that shall include a description of:
a) The nature, timing and extent of planned risk assessment procedures, as determined
under PSA 315.
b) The nature, timing and extent of planned further audit procedures at the assertion level,
as determined under PSA 330.
c) Other planned audit procedures that are required to be carried out so that the
engagement complies with PSAs.

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Changes to Planning Decisions During the Course of the Audit

The overall audit strategy and the audit plan shall be updated and changed as necessary during
the course of the audit.

Direction, Supervision and Review

1. The auditor shall plan the nature, timing and extent of direction and supervision of
engagement team members and review their work.

2. The nature, timing and extent of the direction and supervision of engagement team members
and review of their work vary depending on many factors, including:
• The size and complexity of the entity;
• The area of the audit;
• The risks of material misstatement; and
• The capabilities and competence of the individual team members performing the audit
work.

3. The auditor plans the nature, timing and extent of direction and supervision of engagement
team members based on the assessed risk of material misstatement.

Documentation

The auditor shall document the overall audit strategy and the audit plan, including any significant
changes made during the audit engagement.

Additional Considerations in Initial Audit Engagements

The auditor shall perform the following activities prior to starting an initial audit:
1. Perform procedures regarding the acceptance of the client relationship and the specific audit
engagement.
2. Communicate with the previous auditor, where there has been a change of auditors, in
compliance with relevant ethical requirements.

PSA 315
IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT THROUGH
UNDERSTANDING THE ENTITY AND ITS ENVIRONMENT

1. The objective of the auditor is to

 identify and assess the risks of material misstatement, whether due to fraud or error,
at the financial statement and assertion levels,
 through understanding the entity and its environment, including its internal control,
 thereby providing a basis for designing and implementing responses to the assessed
risks of material misstatement.

2. The auditor shall perform risk assessment procedures to provide a basis for the identification
and assessment of risks of material misstatement at
 the financial statement level; and
 the assertion level for classes of transactions, account balances, and disclosures.
to provide a basis for designing and performing further audit procedures.

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3. The auditor shall:

a) Identify risks throughout the process of obtaining an understanding of the entity and
its environment, including relevant controls that relate to the risks, and by considering
the classes of transactions, account balances, and disclosures in the financial
statements.
b) Assess the identified risks, and evaluate whether they relate more pervasively to the
financial statements as a whole and potentially affect many assertions.
c) Relate the identified risks to what can go wrong at the assertion level, taking account
of relevant controls that the auditor intends to test.
d) Consider the likelihood of misstatement, including the possibility of multiple
misstatements, and whether the potential misstatement is of a magnitude that could
result in a material misstatement.

4. Risk assessment procedures by themselves do not provide sufficient appropriate audit

evidence on which to base the audit opinion.

5. The risk assessment procedures shall include the following:

a) Inquiries of management and others within the entity;
b) Analytical procedures; and
c) Observation and inspection.

6. The auditor’s understanding of the entity and its environment consists of an understanding of
the following aspects:
a) Industry, regulatory, and other external factors, including the applicable financial
reporting framework.
b) Nature of the entity, including the entity’s selection and application of accounting policies.
c) Objectives and strategies and the related business risks that may result in a material
misstatement of the financial statements.
d) Measurement and review of the entity’s financial performance.
e) Internal control.

INTERNAL CONTROL

1. Internal control is the process designed, implemented and maintained by those charged with
governance, management and other personnel to provide reasonable assurance about the
achievement of an entity’s objectives with regard to:

• Reliability of financial reporting;

• Effectiveness and efficiency of operations; and
• Compliance with applicable laws and regulations.

2. When obtaining an understanding of controls that are relevant to the audit, the auditor
shall:
 evaluate the design of those controls; and
 determine whether they have been implemented
by performing procedures in addition to inquiry of the entity’s personnel.

COMPONENTS OF INTERNAL CONTROL

1. Control Environment

The control environment includes the governance and management functions and the
attitudes, awareness, and actions of those charged with governance and management
concerning the entity’s internal control and its importance in the entity.

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Elements of control environment:

a) Communication and enforcement of integrity and ethical values.
b) Commitment to competence.
c) Participation by those charged with governance.
d) Management’s philosophy and operating style.
e) Organizational structure.
f) Assignment of authority and responsibility.
g) Human resource policies and practices.

The auditor shall obtain an understanding of the control environment. As part of obtaining
this understanding, the auditor shall evaluate whether:
a) Management, with the oversight of those charged with governance, has created and
maintained a culture of honesty and ethical behavior; and
b) The strengths in the control environment elements collectively provide an appropriate
foundation for the other components of internal control, and whether those other
components are not undermined by deficiencies in the control environment.

2. The Entity’s Risk Assessment Process

The auditor shall obtain an understanding of whether the entity has a process for:
a) Identifying business risks relevant to financial reporting objectives;
b) Estimating the significance of the risks;
c) Assessing the likelihood of their occurrence; and
d) Deciding about actions to address those risks.

3. The information system, including the related business processes, relevant to

financial reporting, and communication

The auditor shall obtain an understanding of the information system, including the related
business processes, relevant to financial reporting, including the following areas:
 The classes of transactions in the entity’s operations that are significant to the financial
statements.
 The procedures, within both IT and manual systems, by which those transactions are
initiated, recorded, processed, corrected as necessary, transferred to the general
ledger and reported in the financial statements.
 The related accounting records, whether electronic or manual, supporting information,
and specific accounts in the financial statements that are used to initiate, record,
process and report transactions; this includes the correction of incorrect information
and how information is transferred to the general ledger.
 How the information system captures events and conditions, other than transactions,
that are significant to the financial statements.
 The financial reporting process used to prepare the entity’s financial statements,
including significant accounting estimates and disclosures.
 Controls surrounding journal entries, including non-standard journal entries used to
record non-recurring, unusual transactions or adjustments.

The auditor shall obtain an understanding of how the entity communicates financial reporting
roles and responsibilities and significant matters relating to financial reporting, including:
 Communications between management and those charged with governance; and
 External communications, such as those with regulatory authorities.

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4. Control activities relevant to the audit

 Control activities are the policies and procedures to help ensure that management
directives are carried out. Examples of control activities include those relating to the
following:
 Authorization
 Performance reviews
 Information processing
 Physical controls
 Segregation of duties

 The auditor shall obtain a sufficient understanding of control activities to:

 Assess the risks of material misstatement at the assertion level; and
 Design further audit procedures responsive to assessed risks.

5. Monitoring of controls

 Monitoring of controls involves assessing the design and operation of controls on a

timely basis and taking the necessary corrective actions modified for changes in
conditions.

 The auditor shall obtain an understanding of the major activities that the entity uses to
monitor internal control over financial reporting, including those related to those control
activities relevant to the audit, and how the entity initiates remedial actions to deficiencies
in its controls.

 If the entity has an internal audit function, the auditor shall obtain an understanding of
the following in order to determine whether the internal audit function is likely to be
relevant to the audit:
a. The nature of the internal audit function’s responsibilities and how the internal audit
function fits in the entity’s organizational structure; and
b. The activities performed, or to be performed, by the internal audit function.

 The auditor shall obtain an understanding of the sources of the information used in the
entity’s monitoring activities, and the basis upon which management considers the
information to be sufficiently reliable for the purpose.

QUIZZERS

1. Which of the following statements is/are correct?

Statement 1: The client should plan the audit work so that the audit will be performed in aneffective
manner.
Statement 2: The auditor should conduct the audit with an attitude of professionalskepticism.
Statement 3: The auditor should develop and document an overall audit plan describing thescope and
conduct of the audit.
A. Only one statement is correct C. All statements are correct
B. Only two statements are correct D. All statements are incorrect

2. Adequate planning of the audit work helps to ensure that

A B C D
Appropriate attention is devoted to important
areas of the audit Yes No Yes No
Potential problems are identified Yes Yes Yes No
The work is completed expeditiously No Yes Yes No

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3. Which of the following statements is/are correct?

Statement 1: According to PSA 300, the auditor may discuss elements of planning with those
charged with governance and the entity's management.
Statement 2: The audit plan sets the scope, timing and direction of the audit guides the development
of the more detailed overall audit strategy.
Statement 3: The overall audit strategy is more detailed than the audit plan and includes the nature,
timing and extent of audit procedures to be performed engagement team members to obtain sufficient
appropriate audit evidence to reduce audit risk to an acceptablylow level.
A. Only 1 statement is correct C. All statements are correct
B. Only 2 statements are correct D. All statements are incorrect

4. Which of the following matters should be considered by the auditor in developing the overallaudit
strategy?
A. Important characteristics of the entity, its business, its financial performance and itsreporting
requirements including changes since the date of the prior audit.
B. Conditions requiring special attention, such as the existence of related parties.
C. The setting of materiality levels for audit purposes.
D. All of the above.

5. An auditor should design the audit plan so that

A. All material transactions will be selected for substantive testing.
B. Substantive tests prior to the balance sheet date will be minimized.
C. The audit procedures selected will achieve specific audit objectives.
D. Each account balance will be tested under either tests of controls or tests of transactions.

6. Audit plans should be designed so that

A. Most of the required procedures can be performed as interim work.
B. Inherent risk is assessed at a sufficiently low level.
C. The auditor can make constructive suggestions to management.
D. The audit evidence gathered supports the auditor’s conclusions.

7. An auditor most likely obtains an understanding of a new client to

A. Make constructive suggestions concerning improvements to the client’s internal control.
B. Develop an attitude of professional skepticism concerning management’s financial
statement assertions.
C. Evaluate whether the aggregation of known misstatements causes the financialstatements
taken as a whole to be materially misstated.
D. Identify areas of audit emphasis.

8. Which of the following procedures is the auditor most likely to perform after accepting aninitial
audit engagement?
A. Prepare a rough draft of the financial statements and of the auditor’s report.
B. Assess control risk for the assertions embodied in the financial statements.
C. Tour the client’s facilities.
D. Consult with and review the work of the predecessor auditor prior to discussing the
engagement with the client management.

9. To obtain an understanding of a continuing client’s business, an auditor most likely would

A. Perform tests of details of transactions and balances.
B. Read internal audit reports.
C. Read specialized industry journals.
D. Reevaluate the risks of material misstatement.

10. A measure of how willing the auditor is to accept that the financial statements may be materially
misstated after the audit is completed and an unmodified opinion has been issuedis the
A. Inherent risk C. Detection risk
B. Control risk D. Acceptable audit risk

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11. Which of the following audit risk components may be assessed in quantitative terms?
Inherent risk Control risk Detection risk
A. Yes No Yes
B. Yes Yes Yes
C. No No No
D. No No Yes

12. A measure of the auditor’s assessment of the likelihood that there are material misstatementsin an
account before considering the effectiveness of the client’s internal control is called
A. Audit risk C. Detection risk
B. Inherent risk D. Control risk

13. Assessing control risk at a low level most likely would involve
A. Performing more extensive substantive tests with larger sample sizes than originallyplanned.
B. Reducing inherent risk for most of the assertions relevant to significant account balances.
C. Changing the timing of substantive tests by omitting interim-date testing and performingthe tests
at year-end.
D. Identifying specific controls relevant to specific assertions.

14. An auditor assesses control risk because it

A. Is relevant to the auditor’s understanding of the control environment.
B. Provides assurance that the auditor’s materiality levels are appropriate.
C. Indicates to the auditor where inherent risk may be the greatest.
D. Affects the level of detection risk that the auditor may accept.

15. Which of the following is not a step in an auditor’s assessment of control risk?
A. Evaluate the effectiveness of internal control with tests of controls.
B. Obtain an understanding of the entity’s information system and control environment.
C. Perform tests of details of transactions to detect material misstatements in the financial
statements.
D. Consider whether controls can have a pervasive effect on financial statement assertions.

16. It is the process designed and effected by those charged with governance, management, and other
personnel to provide reasonable assurance about the achievement of the entity’s objectives.
A. Internal auditing C. Business strategy
B. Internal control D. Accounting process

17. Which of the following is not one of the three primary objectives of effective internal control?
A. Reliability of financial reporting.
B. Efficiency and effectiveness of operations.
C. Compliance with laws and regulations.
D. Assurance of elimination of business risk.

18. In an audit of financial statements, an auditor’s primary consideration regarding an internal

control is whether the control
A. Reflects management’s philosophy and operating style.
B. Affects management’s financial statement assertions.
C. Provides adequate safeguards over access to assets.
D. Relates to operational activities.

19. Which of the following statements concerning the relevance of various types of controls to afinancial
statement audit is correct?
A. All controls are ordinarily relevant to a financial statement audit.
B. Controls over safeguarding of assets and liabilities are of primary importance, whilecontrols
over the reliability of financial reporting may also be relevant.

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C. Controls over the reliability of financial reporting are ordinarily most directly relevant to a
financial statement audit, but other controls may also be relevant.
D. An auditor may ordinarily ignore a consideration of controls when a substantive audit
approach is taken.

20. Which of the following are considered control environment elements?

Commitment to Organizational
Competence Detection risk Structure
A. No Yes No
B. Yes Yes Yes
C. Yes No Yes
D. No No Yes

21. The components of internal control include

A. Monitoring of controls that sets the tone of the organization.
B. A process of managing risks relevant to preparing financial statements.
C. A control environment consisting of policies and procedures to help ensure thatmanagement
directives are carried out.
D. Control activities that identify, capture, and exchange information.

22. Control activities are the policies and procedures that help ensure that management directivesare carried
out. These include activities relating to authorization, performance reviews, information processing,
physical controls, and segregation of duties. There is proper segregation of duties when an individual
who
A. Records a transaction does not compare the accounting record of the asset with the assetitself.
B. Authorizes a transaction records it.
C. Authorizes a transaction maintains custody of the asset that resulted from the transaction.
D. Maintains custody of an asset has access to the accounting records for the asset.

23. Authorizations can be either general or specific. Which of the following is not an example ofa
general authorization?
A. Automatic reorder points for raw materials inventory.
B. A sales manager’s authorization for a sales return.
C. Credit limits for various classes of transactions.
D. A sales price list for merchandise.

24. An auditor should consider two key issues when obtaining an understanding of a client’s
internal controls. These issues are
A. The effectiveness and efficiency of the controls.
B. The frequency and effectiveness of the controls.
C. The design and implementation of the controls.
D. The implementation and efficiency of the controls.

25. When obtaining knowledge about an entity’s internal control, it is important for the auditor to consider
the competence of its employees, because their competence bears directly and importantly upon the
A. Cost-benefit relationship of internal control.
B. Comparison of recorded accountability with assets.
C. Achievement of the objectives of internal control.
D. Timing of substantive tests to be performed.

26. An auditor should obtain sufficient knowledge of an entity’s information system, including the
related business processes relevant to financial reporting, to understand the
A. Policies used to detect the concealment of fraud.
B. Process used to prepare significant accounting estimates.
C. Safeguards used to limit access to computer facilities.
D. Procedures used to assure proper authorization of transactions.

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27. The primary objective of procedures performed to obtain an understanding of internal controlis to
provide an auditor with
A. Knowledge necessary to plan the audit.
B. A basis for modifying tests of controls.
C. Information necessary to prepare flowcharts.
D. Evidence to use in reducing detection risk.

28. Audit evidence concerning proper segregation of duties normally is best obtained by
A. Direct personal observation of the employee who applies control procedures.
B. Making inquiries of co-workers about the employee who applies control procedures.
C. Preparation of a flowchart of duties performed and available personnel.
D. Inspection of third-party documents containing the initials of who applied controlprocedures.

29. In conducting an audit in accordance with PSAs, the auditor is required to identify and assess the risks
of material misstatement at the financial statement level, and at the assertion level for classes of
transactions, account balances, and disclosures. Some of these risks, in the auditor’s judgment,
require special audit consideration, such as those that involve fraud or complex transactions. Such
risks are called
A. Business risks C. Significant risks
B. Audit risks D. Material risks

30. As a result of obtaining an understanding of an entity’s internal control system, the auditor may
become aware of material weaknesses in the design or implementation of internal control. The
auditor is required to communicate this matter to
A. Those charged with governance or management
B. Chief executive officer
C. Securities and Exchange Commission
D. Board of Accountancy

31. Which of the following controls most likely would provide reasonable assurance that all credit sales
transactions of an entity are recorded?
A. The accounting department supervisor controls the mailing of monthly statements to customers
and investigates any differences reported by customers.
B. The accounting department supervisor independently reconciles, on a monthly basis, the accounts
receivable subsidiary ledger to the accounts receivable control account.
C. The billing department supervisor matches prenumbered shipping documents with entries in the
sales journal.
D. The billing department supervisor sends copies of approved sales orders to the credit department
for comparison to authorized credit limits and current customer account balances.

32. An auditor tests an entity’s policy of obtaining credit approval before shipping goods to
customers in support of management’s financial statement assertion of
A. Valuation. C. Occurrence.
B. Completeness. D. Rights and obligations.

33. Macho Dancer Company uses its sales invoices for posting perpetual inventory records. Inadequate
internal control over the invoicing function allows goods to be shipped but not invoiced. The
inadequate controls could cause what type of misstatement in each of the following accounts?
Revenues Receivables Inventories
A. Understatement Understatement Understatement
B. Overstatement Overstatement Understatement
C. Understatement Understatement Overstatement
D. Overstatement Overstatement Overstatement

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34. Which of the following control activities in an entity’s revenue/receipt cycle would provide
reasonable assurance that all billed sales are correctly posted to the accounts receivable ledger?
A. Each shipment of goods on credit is supported by a prenumbered sales invoice.
B. The accounts receivable subsidiary ledger is reconciled daily to the accounts receivablecontrol
account in the general ledger.
C. Daily sales summaries are compared to daily postings to the accounts receivable ledger.
D. Each sales invoice is supported by a prenumbered shipping document.

35. The auditor’s primary objective in obtaining an understanding of the client’s controls over the
purchasing function is to
A. Investigate the recording of unusual transactions regarding raw materials.
B. Determine the reliability of financial reporting by the purchasing function.
C. Observe the annual physical count.
D. Ascertain that raw materials paid for are on hand.

36. Effective controls relevant to purchasing of raw materials should usually include all of the
following, except
A. Determining the need for the raw materials prior to preparing the purchase order.
B. Systematic reporting of product changes that will affect raw materials.
C. Obtaining financial approval prior to making a commitment.
D. Obtaining third-party written quality and quantity reports prior to payment for the raw
materials.

37. Which of the following controls is not usually performed in the accounts payable department?
A. Indicating on the voucher the affected asset and expense accounts to be debited.
B. Approving vouchers for payment by having an authorized employee sign the vouchers.
C. Accounting for unused prenumbered purchase orders and receiving reports.
D. Matching the vendor’s invoice with the related purchase requisition, purchase order, and
receiving report.

38. The following are appropriate questions on an internal control questionnaire concerningpurchase
transactions, except
A. Are all goods received in a centralized receiving department and counted, inspected, and
compared with purchase orders on receipt?
B. Are intact cash receipts deposited daily in the bank?
C. Are prenumbered purchase orders and receiving reports used and accounted for?
D. Are an approved purchase requisition and a signed purchase order required for each
purchase?

39. Which of the following is of least concern to an auditor in assessing the risks of material
misstatement?
A. Signed checks are distributed by the controller to approved payees.
B. Checks are signed by one person.
C. Cash receipts are not deposited intact daily.
D. Treasurer does not verify the names and addresses of check payees.

40. To provide assurance that each voucher is submitted and paid only once, an auditor mostlikely
would examine a sample of paid vouchers and determine whether each voucher is
A. Supported by a vendor’s invoice.
B. Stamped “paid” by the check signer.
C. Prenumbered and accounted for.
D. Approved for authorized purchases.

41. Which of the following is an essential control procedure to ensure the accuracy of the recordedinventory
quantities?
A. Calculating unit costs and valuing obsolete or damaged inventory items in accordance with
inventory policy.
B. Testing inventory extensions.

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C. Performing a gross profit test.

D. Establishing a cutoff for goods received and shipped.

42. Effective internal controls over inventories are designed and implemented for the followingreasons,
except
A. Inventories typically represent a large component of an entity’s current assets.
B. Inventories are the most liquid asset.
C. Inventories directly affect the financial performance of an entity.
D. Inventories typically represent a large portion of an entity’s total assets.

43. Your client, a merchandising concern, has annual sales of P30,000,000 and a 40% gross profit rate.
Tests reveal that 2% of the peso amount of purchases do not get into inventory because of breakage and
inventory pilferage by employees. The company estimates that these losses could be reduced to 0.5%
of purchases by designing and implementing certain controls costing approximately P350,000.
Should the controls be designed and implemented?
A. Yes, regardless of cost-benefit considerations, because the situation involves employee theft.
B. Yes, because the ideal system of internal control is the most extensive one.
C. No, because the cost of designing and implementing the added controls exceeds the projected
savings.
D. Yes, because the expected benefits to be derived exceed the cost of the added controls.

44. Which of the following controls most likely would be implemented to achieve the productioncycle
control objective of maintaining accurate inventory records?
A. Periodic inventory counts are used to adjust the perpetual inventory records.
B. A just-in-time inventory ordering system keeps inventory levels to a desired minimum.
C. Perpetual inventory records are periodically compared with the net realizable value of
individual inventory items.
D. Purchase requisitions, receiving reports, purchase orders, and vendor invoices areindependently
matched before payment is approved.

45. Effective controls over the payroll function may include

A. Custody of rate authorization records by the supervisor of the payroll department.
B. Preparation of payroll transaction journal entries by an employee who reports to the
supervisor of the personnel department.
C. Verification of agreement of job time tickets with employee clock card hours by a payroll
department employee.
D. Reconciliation of totals on job time tickets with job reports by employees responsible forthose
specific jobs.

46. Employees of a manufacturing entity are often required to use time cards and job time tickets.Which of
the following statements concerning the use of these documents is incorrect?
A. Time reported on job time tickets should be reconciled to time cards.
B. Payroll should be calculated based on job time tickets.
C. Each employee should have only one time card.
D. An employee may have one or many job time tickets in a day.

47. Which of the following personnel department procedures reduces the risk of payroll fraud and
represents an appropriate responsibility for the department?
A. Authorizing the addition or deletion of employees from the payroll.
B. Authorizing overtime hours.
C. Collection and retention of unclaimed paychecks.
D. Distributing paychecks.

48. An internal control objective concerning property, plant, and equipment (PPE) acquisitions isthat they
be recorded at the correct amounts and in the proper period, and properly classified. In which of the
following conditions would an auditor most likely assess a high level of risk ofmaterial misstatement?
A. All material acquisitions of PPE are required to be approved by the board of directors.

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B. Most additions are self-constructed by the entity.

C. Recently acquired loans include covenants that preclude further plant acquisitions for 5years.
D. Gross PPE increased 30% during the current period.

49. Which of the following controls would an entity most likely use in safeguarding against theloss of
trading securities?
A. The independent auditor traces all purchases and sales of trading securities through thesubsidiary
ledgers to the general ledger.
B. An independent trust company that has no direct contact with the employees who haverecord-
keeping responsibilities has possession of the securities.
C. The internal auditor inspects the trading securities in the entity’s safe each year on the
balance sheet date.
D. A designated member of the board of directors controls the securities in a bank safe-deposit
box.

50. The following controls are designed to protect investment securities, except
A. Investment securities should be properly controlled physically in order to preventunauthorized
usage.
B. Custody over investment securities should be limited to personnel having record-keeping
responsibility over the securities.
C. Securities should be registered in the entity’s name.
D. Access to securities should be vested in two individuals.

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